Page 54 - MetalForming April 2015

Software-as-a-Service ERP
premise solutions now are offered through SaaS models. But perhaps the most telling statistic: none of current SaaS users have this perception.
So don’t assume a solution that is on-premise necessarily has more func- tionality. Carefully evaluate each for its specific fit against your needs.
Accounting for Costs and Risks
Before making a purchase (or a replacement) decision, consider how to account for the costs. If choosing an on-premise solution, with the purchase of a substantial up-front license, the default accounting is to treat it as a capital expense (CapEx). You may have some alternatives through leasing and some on-premise solutions can be paid for through subscription pricing. But generally, all SaaS solutions are paid for through subscriptions, giving you the alternative of treating the cost as an operating expense (OpEx). Whether this is a requirement or even a prefer- ence is a question you must answer along with your accountants.
The ability to treat the purchase as an operating expense often is associated with lowering the risk. And in fact the perception of SaaS as a lower risk was cited by 26 percent of all respondents. Lower risk and “pay as you go” sub- scription pricing however should not be confused with “Let’s try it and if it does- n’t work, we can just walk away.” Make no mistake, the implementation of an ERP solution, SaaS or otherwise, is a major undertaking. It is the system with which you will run your business and there is a high degree of probability it will introduce change to the way you run it.
However there is one risk that SaaS might seem to introduce—that of downtime and unpredictable per- formance. This concern was expressed by 35 percent of survey respondents. And 34 percent expressed concerns over unreliable Internet service. This is perhaps the single best reason for not considering a SaaS deployment, at least until reliability is at an acceptable level.
But where the problem does not result from poor service from the car-
rier, here is another example where due diligence is required. Ask for his- torical performance including outages and downtime and consider asking for guarantees. Expect a higher level of commitment than you yourself could make to your own constituents. SaaS solution providers’ very livelihood depends on this and as a result they build in redundancies that you as an individual company could probably never afford. Companies that have experienced any one of a number of natural disasters can attest to the value of alternative plans for business conti- nuity provided by SaaS solutions.
Distributed Environments
This redundancy often is achieved through backup facilities in different parts of the country or even the world. Yet operating across a distributed envi- ronment has become a way of life for a large percentage of businesses today, even smaller ones, and this may pro- vide additional incentive to consider SaaS ERP. In fact 64 percent of survey respondents had more than one oper- ating location served by ERP even though the survey sample included companies of all sizes from very small to very large (Fig. 4). Even small com- panies, those with annual revenues less than $25 million, averaged 2.1 operating locations. This average esca- lated to 13.6 in companies with rev- enues greater than $1 billion.
This level of distributed environment helps explain, at least in part, why large enterprises are so ready to consider SaaS ERP. What better way to control the stan- dardization of solutions and processes than through SaaS deployment?
While 23 percent of all survey respondents cited the ease of remote access for a distributed workforce as a key advantage of SaaS, this percent- age jumped to 33 percent for those actually running a SaaS solution. Only 16 percent noted the ease of bringing up remote sites, but again, this per- centage jumped to 26 percent for SaaS users. Of course, these distributed envi- ronments don’t necessarily rule out other deployment options. Centrally
hosted environments might accom- plish the same goal, but again the bur- den of installation and upgrades falls on either by the host or the company itself, whereas the SaaS solution provider can bear much of that burden of responsibility.
What About Security?
The final and often deciding factor in considering SaaS ERP is one of secu- rity. It’s one thing to put your sales con- tacts in the cloud, but quite another to put your system of record someplace where you can’t see it or control it your- self. And yes, the number-one barrier to SaaS deployment is concern over secu- rity, with 53 percent of survey respon- dents expressing this fear. And yes, everyone should be concerned over security. But they should be concerned regardless of deployment option.
Don’t make the mistake of thinking an on-premise implementation is nec- essarily any more secure than SaaS. That is unless your data center is com- pletely contained with no possibility of access from outside the four walls of your building. That means no VPN access. It means no external consultant or guest ever connects their laptop to your network. It means no laptop ever leaves the building to be potentially connected to any other network, then brought back and connected to yours. There aren’t too many installations, if any, like this in the world today.
In fact, if you are a small company, without a dedicated IT security expert, chances are that you assume more risk than you would in a SaaS environment, particularly one that has successfully completed an annual SAS 70 Type II audit. While 53 percent of respondents expressed concerns over security, anoth- er 25 percent of all survey participants, and 43 percent of those deployed as SaaS, admitted that part of the appeal of SaaS was the comfort of leaving secu- rity and other IT issues to the experts.
Given all of these considerations as well as data from our 2014 survey respondents, on balance the advantages of a SaaS environment for ERP seem to outweigh the disadvantages. M F
52 MetalForming/April 2015
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